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Middle income households face growing insecurity in work and housing

20 Feb 2024

The ‘squeezed middle’ is now the ‘precarious middle’ with those on middle incomes* struggling to save, and more likely than before to be in insecure jobs and insecure homes. For single parents, the problem is particularly acute, with those who are in work more likely to be in insecure work than not.

Caught in the middle, published today from Professor Donald Hirsch at the Financial Fairness Trust and Eleni Karagiannaki from the London School of Economics, found:

Job insecurity among the middle third of the income distribution appears to have got worse since it was highlighted nearly thirty years ago. In particular, insecure work has grown sharply for single adults:

  • Lone parents are more likely to work than a decade ago, but even on middle incomes most of their jobs are now insecure.
  • For singles without children on middle incomes, job insecurity has also grown.
  •  In contrast, for those on middle incomes in couples, there’s a three in four chance that one partner has secure work.

Private tenants face housing insecurity, often with unaffordable rents:

  • Three in ten private tenants in the middle have ‘unaffordable’ rents, defined as spending more than a third of their income on housing costs. This combines with the insecurity of private renting.
  • People in their 30s are most likely to face the insecurity and high costs of being private tenants, and there are as many private tenants on middle incomes as on low incomes in this age group.
  • Rising interest rates could cause the proportion of households with unaffordable mortgages to almost double, from 10% to 19%.

People on middle incomes face a high chance of being lower down the income distribution next year, due largely to unstable job markets:

  • A household in the middle fifth of the income distribution has a one in three chance of being in the bottom 40% in the following year.
  • There’s also a one in ten chance they would be in the bottom 20%, probably below the poverty line.

The report highlights the importance of helping people on middle incomes to save. Increased income insecurity makes it all the more important to be able to save for a rainy day. But the report calculates that middle income households building rainy day and pension savings, while also paying back student loans and facing high housing costs, can be left with too little remaining income for an acceptable living standard today.

Professor Hirsch, Policy Advisor at abrdn Financial Fairness Trust, said:

“Being on a middle income does not make people secure. In the present cost of living crisis, the vulnerabilities of people on modest incomes have become more apparent. They face significant uncertainties, and are rightly encouraged to save both for rainy days and their retirement. Yet if they are also paying off student debt and have high housing costs, it becomes difficult to maintain a decent living standard today – even at the minimum level often associated with lower income groups.

“Measures to improve predictability, stability and the right to flexible working had been promised for the present Parliament, but were not delivered. In the coming Parliament, this should be a priority.”

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* Definitions:

Middle incomes: in middle fifth of the household income distribution.

Housing affordability:  Households said to have unaffordable housing costs if they spending more than a third of post-tax income on rent or mortgage.

Insecure work: Self-employed, in a full-time job for less than two years, in a part-time job for less than three years or in a full-time job paying less than half the full-time average.